We spoke with legendary investor and rally skeptic Jim Rogers for his take on the current market.

Author : Nick Tay

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Unless you’re new to investing, chances are you’ve heard of Jim Rogers. Co-founder of the Quantum Fund, he returned a yearly compounded return of 38% over 11 years (source: Streetstories.com).

He has an air of someone who’s seen it all and done it all. As the sprightly 67-year old father of two relaxes in his chair, we start off the interview withhis take on the rally.

Rally Skeptic
The world is flush with stimulus money. And Rogers believes some of it has flowed into the stock market. “Nearly every central bank in the world has pumped out and printed huge amounts of money. Most governments around the world have spent huge amounts of money…the money has to go somewhere, and one of these places is into stocks.”

“This is a very strong rally and a very powerful rally…but I do know there are more problems to come down the road,“ says Jim on the rally. He remains skeptical saying, “(governments) can’t keep doing this forever. I’ve seen powerful rallies like this one and they usually last longer than people expect, including me.”

A strong rally doesn’t mean Jim is staying out of the market. He still holds a position in China, although he isn’t adding to it.

Hold China
“Last October and November the China market collapsed…it looked like panic selling. And you should nearly always buy when there’s panic selling,” says Jim on his position in China.

Since then however, he’s been holding, not adding to his China position. “When something doubles in nine months, I don’t like to jump into a moving train. When you see something that strong, normally something causes a correction if nothing else."

Jim intends to hold for a long time; longer than most investors would consider ‘long term’. “I hope I never sell my Chinese shares. I hope my Chinese shares are held by my children someday. If I’m right about China, in that China is the next great country in the world, I want to own these shares for a hundred years.”

This doesn’t mean Jim is blind to the risks, although he remains strongly bullish on China. One issue that could end the China story is the supply of water. “I’ve been around the world a couple of times and I’ve seen whole societies disappear because the water disappeared. If China is unable to solve its water problem, there’s no China story, it’s the end of the story. They’re working on it. They’re spending billions of dollars trying to solve their water problem. And if nothing else, somebody is going to make a lot of money while they try. But we won’t know for several more years.”

While Jim is holding on to China, one other asset he’s bullish on is commodities. And this time, he’s been buying.

Buy CommoditiesJim’s case for commodities seems airtight. “If the world economy is going to get better, in my view commodities will lead the way out because there are shortages developing of all commodities…if the economy is not getting better, you still want to own commodities because people are printing so much money and in a period of shortages the money is going to somewhere and one of the places will be into commodities to protect themselves against declining paper money.”

Another reason for his bullishness on commodities is his belief that the combined efforts of central banks will result in massive inflation. “Prices are already going up and have been going up for many things. Even the US government that lies about inflation, in their most recent inflationary report…they acknowledge that there’ve been price increases. Overall, energy prices are down and down a lot, therefore they say there’s not much inflation. Go shopping; you’ll see prices are going up.”

The commodities story, Jim believes, still has a long way to go. “I’m not good at market timing, but I do know the bull market for commodities still has a long way to go…everything has to go much much much higher.”

So here’s what Jim has been doing: He’s holding China and buying commodities.

Advice To Investors
As the author of A Gift To My Children: A Father’s Lessons For Life And Investing (published by Wiley), Jim believes that money is an important part of a child’s education. “All children need to learn about money. Everybody needs to understand at least the basics of what to do with money, and if you want to do well, you should learn about investing…unless you’re a monk or a poet or a mystic…money’s going to be significant in everybody’s life.”

To investors, Jim offers this piece of advice:Don’t invest into anything unless you know a lot about what you’re doing. “Jumping around, trying to invest in everything in sight has never led to anybody getting rich. The way you get rich is you find something really good, you focus, you concentrate, you put your eggs in that basket. You watch that basket very carefully. That’s how you get rich. You could go broke, but that’s how you get rich.”

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